World Bank climate funds: local communities left out

07 December 2011

Guest post by Innocent Sithole, used to be web intern

Our new report, Power to the people? reveals how the World Bank is diverting climate funds from communities to multinational corporations. Instead of giving energy poor people access to much needed electricity in Mexico, the World Bank’s Clean Technology Fund (CTF) is powering big business and potentially adding to the country’s energy inequalities.

The CTF’s flagship project in Mexico, the La Mata and La Ventosa Wind Park in the state of Oaxaca, is set to produce 67.5 MW per year, enough to power 160,000 homes in a state where around 7 per cent of the population lack access to electricity. But in an arrangement that exposes the project’s unfair focus on big business rather than poor people, none of this electricity will power homes of local people. Instead it will be sold at a discounted rate to Walmart, the world’s largest corporation.

The wind park is 99 per cent controlled by a subsidiary of the French energy giant EDF. However, by owning a tiny stake in the wind park, Walmart has been able to circumvent Mexico’s energy laws and officially claim that it has produced the power itself. The World Bank now sees this legal loophole as a way by which to drive the transformation of Mexico’s electricity sector. It will finance up to five projects that are similar to the Walmart EDF “self supply” arrangement, as well as conducting a “knowledge sharing” project that teaches other companies how to exploit the same loophole.

The “self supply” model completely marginalises ordinary people and could worsen energy inequalities.Apart from the revenue earned from supplying Walmart with electricity, the La Mata and La Ventosa project will also benefit from the sale of carbon credits. The $12 million of carbon credits will come from the Clean Development Mechanism (CDM), a UN administered scheme that allows rich industrialised countries and companies with greenhouse gas emissions reduction targets to invest in “emissions-saving projects” that supposedly compensate for their continued pollution. However, as we show in the report, the World Bank fund should explicitly exclude backing CDM funded projects so as not to finance projects that contribute to delays in emissions reductions in industrialised countries.

The World Bank hopes that the wind park will generate up to 2,000 MW of further private sector wind projects. However, there is growing local concern that these projects result in land grabbing, as well as supporting a development model that undermines local culture, indigenous rights and collective landholdings “The exclusion of communities from decision making processes means that wind projects in the Isthmus appear as a threat to local peoples’ livelihoods, rather than as an opportunity to widen energy access in a sustainable manner,” the report notes.

All climate finance projects should consult local communities in planning and decision making processes, so that projects clearly benefit the areas where they are located. The fund should also prioritise increases in energy access in its funding decisions and stop funding or encouraging private sector energy projects using Mexico’s “self supply” framework.This study clearly shows that the World Bank cannot be trusted with climate finance.

At the climate talks in Durban the UN is set to establish a new fund for long term climate finance. Email your MP now to ask them to make sure that the new climate fund is free from the influence of the World Bank and will prioritise the needs of local communities over the demands of big business.

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